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Bank bonuses are taxable as income, so taking advantage of promotional offers could result in a surprise tax bill if you don’t plan ahead. But since bank bonuses can be lucrative, allowing you to earn hundreds of dollars with little effort, they can be well worth the effort.
Key Takeaways
- Like earned interest, bank bonuses are taxable as income.
- Bank bonuses typically range from $100 to $500 for personal deposit accounts, like checking and savings accounts.
- New deposit account customers may qualify by opening an account and meeting deposit or balance requirements or other criteria.
- Depending on the bank, you may receive a form 1099-INT or 1099-MISC for your taxes.
How Are Bank Bonuses Taxed?
“Get $250 for opening a new account!” You’ve likely seen bank bonuses and promotions advertised by credit unions and banks. As financial institutions compete for customers, they often use bonus offers to encourage individuals to open new accounts.
Although bank bonuses are relatively easy to earn, they are still considered income; as a result, you’ll have to pay taxes on the bonus amount. Depending on the financial institution and the amount of the bonus, the bank may send you a Form 1099-INT, Interest Income, or a Form 1099-MISC, Miscellaneous Information, with the bonus amount listed on it. You’ll use this form to report the bonus on your income tax return.
The way the bonus is taxed depends on your income tax bracket. As your income grows, you may enter a higher tax bracket, but that doesn’t mean you pay the higher tax rate on your entire income. Instead, you pay each tax rate on the income within that bracket. For a single taxpayer, the following brackets apply in 2024:
| 2024 Marginal Tax Rates | |
|---|---|
| Income | Tax Rate |
| $0 to $11,600 | 10% |
| $11,601 to $47,150 | 12% |
| $47,151 to $100,525 | 22% |
| $100,526 to $191,950 | 24% |
| $191,951 to $243,725 | 32% |
| $243,726 to $609,350 | 35% |
| $609,351 and up | 37% |
For example, let’s say your income is $47,500, and you earn $500 in bank bonuses, bringing your total taxable income to $48,000.
The following tax brackets would apply for 2024:
- 10% on the first $11,600
- 12% on the next $35,550
- 22% on the remaining $850
If you receive your bonus in 2025, here are the tax brackets for a single taxpayer in 2025.
| 2025 Marginal Tax Rates | |
|---|---|
| Income | Tax Rate |
| $0 to $11,925 | 10% |
| $11,926 to $48,475 | 12% |
| $48,476 to $103,350 | 22% |
| $103,351 to $197,300 | 24% |
| $197,301 to $250,525 | 32% |
| $250,526 to $626,350 | 35% |
| $626,351 and up | 37% |
Using the earlier example, your income is $47,500, and you earn $500 in bank bonuses for a total taxable income of $48,000.
The following tax brackets would apply for 2025:
- 10% on the first $11,925
- 12% on the next $36,550
In general, setting aside 10% to 35% of your bonus amount will allow you to comfortably cover the tax bill resulting from the bonus.
How to Report a Bank Bonus: Form 1099-INT and Form 1099-MISC
While credit card bonuses are viewed as rebates—and, therefore, are not subject to income tax—bank bonuses, such as those awarded for opening a new checking account and meeting requirements, are taxable as income. The bank or credit union will typically report the bonus amount and will send you either Form 1099-MISC or Form 1099-INT. When you receive the form, you should enter the amount listed on it on your personal income tax return.
Not all financial institutions report bank bonuses, so you may not receive a form from your bank. However, the bonus is still taxable as income even if you didn’t get a form. You’ll have to self-report the bonus amount; to do so, enter the dollar amount on your Form 1040 under “other income.”
Frequently Asked Questions (FAQS)
Do I Owe Taxes on Bank Bonuses?
Yes, bank bonuses are taxable as income and must be reported on your income tax return.
How Much Are Bank Bonuses Taxed?
The way your bank bonus is taxed depends on your tax bracket. In 2024, tax bracket rates range from 10% to 37%, so it’s a good idea to set aside 10% to 30% of your bonus to cover the tax on it.
Why Do Banks Give Bonuses for Opening Accounts?
Banks offer bank bonuses—mainly for checking and savings accounts—as recruitment and retainment tools for new customers. The banking market is highly competitive, so promotional bonuses allow banks to stand out from other financial institutions.
How Do You Report a Bank Bonus to the IRS?
In most cases, you’ll receive a Form 1099-INT or Form 1099-MISC from your bank or credit union with the amount of the bonus listed. You can use that form to fill in your personal income tax return. If you don’t receive the form, you can report the bonus by adding it manually to your 1040.
The Bottom Line
Bank bonuses can be an easy way to earn extra money simply for opening and funding a new checking or savings account. However, the money isn’t wholly free of strings. Bank bonuses are taxable as income and, if you don’t set money aside, could result in a surprise at tax time. To avoid any issues, set aside a portion of your bonus to cover the resulting taxes.
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